British Chancellor Alistair Darling today ruled out imposing a US-style levy on British banks propped up by the taxpayer despite anger among many Labour MPs at the return of huge City bonuses.
Barack Obama is to hit financial institutions with a 0.15% charge on liabilities in a bid to recoup at least $90bn (€101.74bn) of taxpayer money spent rescuing the sector from collapse.
But Mr Darling, speaking to The Scotsman newspaper after a visit to the Edinburgh HQ of the Royal Bank of Scotland, insisted that he would not go down that route.
“No, we are not. The Americans are doing something different,” he said, pointing out that the UK had bought shares in the troubled banks which could be sold in future years.
Demands for extra measures against the banks mounted yesterday when it was disclosed that US banking giant JP Morgan Chase had more than doubled profits in 2009 and that bumper pay, bonuses and benefits were up 18%.
Mr Darling last month unveiled a 50% tax on bonuses but banks are expected to choose to maintain mega-payouts and stump up the tax rather than reduce payments to staff.
Labour MP John Mann said: “We have the ability now to copy what Obama has done on the principle of taxing bankers’ bonuses. Bankers can’t now use the excuse that they will go abroad, because if America is doing it – and that’s where most of the big investment banks are – then there is nowhere else to go.”
Mr Darling rejected copying the US as shadow chancellor George Osborne repeated his support for a US-style levy – but only if international agreement could be secured for it to be applied across major economies.
The International Monetary Fund is due to report in April on the prospects of such a “resolution fund”, which was among reform options put forward by British Prime Minister Gordon Brown when G20 finance ministers gathered in November.
Another of his suggestions – a “Tobin tax” on transactions – was rejected by the US.
UK Business Secretary Lord Mandelson, in an interview with the Daily Telegraph, said banks should “reflect on” their decision not to hold back on bonuses despite the 50% tax.
“The point was to modify banks’ behaviour. Insofar as the bonus has been maintained and banks have chosen to pay the charge out of their profits, you can argue that the immediate effect has been not to change their behaviour,” he said.
“That is something banks need to reflect on.”